Assume a $55,000 investment and the following cash flows for two alternatives. Year Investment A Investment B $ 15,000 25,000 1 $35,000 15,000 25,000 3 10,000 20,000 4 5 20,000 a. Calculate the payback for investment A and B. (Round your answers to 2 decimal places.) Investment A Investment B years years b. Which investment would you select under the payback method? Investment A O Investment B c. If the inflow in the fifth year for Investment A was $20,000,000 instead of $20,000, would your answer change under the payback method? Yes O No
Assume a $55,000 investment and the following cash flows for two alternatives. Year Investment A Investment B $ 15,000 25,000 1 $35,000 15,000 25,000 3 10,000 20,000 4 5 20,000 a. Calculate the payback for investment A and B. (Round your answers to 2 decimal places.) Investment A Investment B years years b. Which investment would you select under the payback method? Investment A O Investment B c. If the inflow in the fifth year for Investment A was $20,000,000 instead of $20,000, would your answer change under the payback method? Yes O No
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Assume a $55,000 investment and the following cash flows for two
alternatives.
Year
Investment A Investment B
$ 15,000
$35,000
1
2
25,000
10,000
20,000
15,000
25,000
3
4
20,000
a. Calculate the payback for investment A and B. (Round your answers
to 2 decimal places.)
Investment A
years
Investment B
years
b. Which investment would you select under the payback method?
O Investment A
O Investment B
c. If the inflow in the fifth year for Investment A was $20,000,000
instead of $20,000, would your answer change under the payback
method?
Yes
O No](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdc82dccc-d4a1-496c-bc5a-0472ca900b83%2F46d1414e-cd52-4c9b-b468-1c533147bae3%2F7e80vqn_processed.png&w=3840&q=75)
Transcribed Image Text:Assume a $55,000 investment and the following cash flows for two
alternatives.
Year
Investment A Investment B
$ 15,000
$35,000
1
2
25,000
10,000
20,000
15,000
25,000
3
4
20,000
a. Calculate the payback for investment A and B. (Round your answers
to 2 decimal places.)
Investment A
years
Investment B
years
b. Which investment would you select under the payback method?
O Investment A
O Investment B
c. If the inflow in the fifth year for Investment A was $20,000,000
instead of $20,000, would your answer change under the payback
method?
Yes
O No
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